The Russian central bank has slashed its key interest rate from
14% to 12.5% due to "signs of stabilisation in annual inflation".

Since the collapse of the oil price last year and the onset of
international sanctions due to Russia's involvement in the
ongoing crisis in Ukraine the Russian central bank has been
caught between the vice of high inflation and slowing growth.

However, in recent months the country has started to exceed
expectations on the former, allowing the central bank to ease its
headline policy rate more quickly than many expected.

According to the Bank of Russia's forecast, rate of growth in
consumer prices is slowing earlier than previously expected.
Annual inflation will fall to less than 8% a year and move
towards the target level of 4% in 2017. As a further weakening of
inflationary risks, the Bank of Russia is ready to continue the
reduction in the key rate.

However, the bank still expects a significant decline to GDP in
the first quarter and is warning that the domestic situation
could well worsen in the short term. It notes reduced retail
lending, low investment and weak domestic demand as factors that
could all dampen the country's growth outlook.